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Arcadia losses "worse than expected", say suppliers

Arcadia Group suppliers are concerned that the company’s operating losses for the 53 weeks to 1 September 2018 were “much worse” than anticipated. 

Embattled Arcadia Group today reported an operating loss of £138m for the period, and admitted it could require additional financing to deliver its turnaround. This is the first time in seven years that Sir Philip Green’s empire has reported a loss, as it fell into the red from a £199m profit in 2017. The retail group’s turnover for the period dipped 4.5% to £1.8bn, which it attributed to “the ongoing challenge global market conditions for retailers”.  EBITDA decreased 40% to £78.3m.

“I’m shocked by the results”, the managing director of one Arcadia supplier said. ”I expected them to be poor, but not to this extent. They are much worse than we expected.

“The results are certainly a reflection of tough trading conditions.”

Arcadia successfully passed seven company voluntary arrangements in June this year, to close 48 of its UK and Irish stores and slash rents across the remainder of its portfolio. The group’s brands comprise Topshop, Topman, Wallis, Burton, Dorothy Perkins, Evans, Miss Selfridge and Outfit. As part of the CVAs, Topshop and Topman’s retail operations in the USA were placed into administration.

The supplier added: “It will be interesting to see what happens next year – but to go from a loss that big to become profit-making again will be almost impossible. As the report mentions, the brands are strong, but if people aren’t accessing them then they simply aren’t strong enough. It’s now time for optimisation and for the group to transform for a more digital age.”

The owner of one company, which used to supply Arcadia, agreed: “The figures are lower than we all thought – this will worry quite a few suppliers.

“The business has been in decline for ages and I can’t see a way out for them. I personally can’t see how the group can improve its business now because there is no investment at all going into it – how can they have a long-term future, especially when it is running out of suppliers?”

The managing director of another Arcadia supplier said: “The whole trade has been in turmoil for the past two years. The worries are constant for we suppliers, and there will be even more worrying times ahead.”

However, he added that suppliers should hopefully start to “see a bit of light at the end of the tunnel” since the group launched a CVA: “They knew these results were coming, so they’ve put things in place to try and stem losses for the future years. It is undergoing massive changes and is confident it will deliver on those plans.”

He added: “The group has now got to get the right people in, they’ve got to be razor sharp and movers and shakers of the generation they’re appealing to. I can’t see why it can’t get back to the glory.”

The results follow the retirement of Arcadia COO David Shepherd earlier this week, shortly followed by the departure of interim chairman Jamie Drummond-Smith

The group has denied reports that the business is splitting into separate brands ahead of a possible sale. 

 

Readers' comments (1)

  • Really am surprised over the comments, reports in autumn 2018 suggested Topshop sales were running at -10%, and stores across the group have been closing. Losing 10% on the top line presents massive problems on the bottom line!

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